Philip purchased an apartment building in 2001 for $1,000,000.During 2017,the building is sold for $800,000.The accumulated depreciation on the building as of the sale date was $300,000.What is the amount and character of the gain recognized on the sale?
A)$100,000 Section 1250 ordinary income.
B)$100,000 Section 1231 long term capital gain.
C)$100,000 unrecaptured Section 1250 gain.
D)$100,000 ordinary income.

Question

Quizplus · Accepted Answer

The gain is calculated as the selling price ($800,000) minus the adjusted basis ($1,000,000 - $300,000 depreciation = $700,000), resulting in a $100,000 gain. This gain is unrecaptured Section 1250 gain, which is taxed at a maximum rate of 25%.

Philip Purchased an Apartment Building in 2001 for $1,000,000